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The bankrupt operating unit of Caesars Entertainment Corp. yesterday proposed mediation in its chapter 11 case, potentially changing the course of the litigious, drawn-out bankruptcy proceedings, Reuters reported yesterday. Angry creditors have accused Caesars of looting the operating unit before its bankruptcy to benefit private equity owners Apollo Global Management and TPG Capital Management, creating a stumbling block for any restructuring deal in the $18 billion bankruptcy. In a motion filed in the Northern District of Illinois court yesterday, Caesars Entertainment Operating Co. said that it believes a mediator would help creditors reach a compromise. The proposal comes ahead of the expected release later this month of an independent probe into pre-bankruptcy transactions.

Hancock Fabrics Inc. filed for its second bankruptcy yesterday and said that it might put the entire company of 250 retail sewing and crafting stores up for sale, Reuters reported. The company said that the chapter 11 filing would allow it to restructure its balance sheet, cut costs, close underperforming stores and access liquidity. Hancock said that it had assets of about $151.4 million and liabilities of $182.1 million, according to court documents. The company previously filed for chapter 11 bankruptcy in 2007 and emerged a year later. The case is Hancock Fabrics Inc., U.S. Bankruptcy Court, District of Delaware, No. 16-10296.

Horsehead Holding Corp. yesterday filed for Chapter 11 bankruptcy protection, a little more than a month after the Pittsburgh-based manufacturer missed a $1.9 million payment and saw its stock plummet more than 90 percent, the Pittsburgh Business Times reported today. Horsehead filed for chapter 11 in the U.S. Bankruptcy Court for the District of Delaware listing liabilities of $544.7 million and total assets of $1 billion. Its biggest unsecured claims are a $100 million unsecured convertible note and a $400 million unsecured convertible note, both administered by U.S. Bank National Association, according to a bankruptcy filing. It had about $1 million in cash and applied for permission for $90 million in debtor-in-possession financing.

Natural gas company Peregrine Midstream Partners LLC filed for chapter 11 protection yesterday, having run out of money with its natural gas facility only a few months from completion, the Wall Street Journal reported today. Peregrine entered bankruptcy saying that it was two-to-three months away from finishing construction on its Ryckman Creek natural gas storage facility, a project that the company has been working on since 2011. But the company ran out of money near to the finish line and has filed for bankruptcy to secure additional financing, according to documents filed with the U.S. Bankruptcy Court in Wilmington, Del. ING Capital LLC, one of the project’s pre-bankruptcy lenders, has agreed to provide $3 million in bridge bankruptcy financing that will hold the company over for 30 to 45 days, according to court documents. The company, ING and its other lenders are also in negotiations on an additional $30 million in funding. Read more. (Subscription required.) 

Get a better understanding of what happens when an oil, gas or other natural resources company goes bankrupt with ABI’s When Gushers Go Dry: The Essentials of Oil & Gas Bankruptcy. 

Samson Resources Corp. is asking a bankruptcy judge to allow it to sell about $16.5 million worth of wells that are no longer in use, Dow Jones Daily Bankruptcy Review reported today. The company isn't asking to sell the wells through a typical bankruptcy auction process. Instead, Samson said in court papers filed on Friday that it plans to sell approximately 1,262 wells and related property at an auction at broker-dealer Oil & Gas Asset Clearinghouse. The company plans to sell these wells at the scheduled March 9 auction at the Clearinghouse or otherwise hold private sales, according to court papers. Read more. (Subscription required.) 

Get a better understanding of what happens when an oil, gas or other natural resources company goes bankrupt with ABI’s When Gushers Go Dry: The Essentials of Oil & Gas Bankruptcy. 

Wall Street financier Lynn Tilton has agreed to open talks with bond insurer MBIA Inc. that could lead to a big change in her role at the collateralized loan funds that feed cash to her $2.5 billion distressed-debt empire, the Wall Street Journal reported today. Tilton and MBIA will discuss options including the appointment of an independent fiduciary to serve as collateral manager for three collateralized loan obligations (CLOs) dubbed Zohar I, II and III, a bankruptcy court judge said yesterday. The CLOs provide funding for the companies she owns. The announcement came at a bankruptcy court hearing in White Plains, N.Y., where Tilton and MBIA clashed over how to resolve the financial problems that erupted when Zohar I defaulted last year and the bond insurer covered the default. Tilton filed an involuntary bankruptcy case for Zohar I late last year, saying that she needed to protect it from MBIA. Joined by Cayman Islands trustees, MBIA opposed the involuntary bankruptcy and has asked that it be dismissed.

Interim U.S. Trustee Andrew Vara said in court papers yesterday that the outlook is so bleak for a bankrupt biotechnology company briefly led by controversial investor Martin Shkreli that its management should be replaced by an independent trustee, Reuters reported. KaloBios Pharmaceuticals Inc., based in South San Francisco, Calif., filed for chapter 11 protection in December just weeks after Shkreli was arrested for engaging in what U.S. prosecutors said was a Ponzi-like scheme at his former hedge fund. Vara yesterday asked the U.S. Bankruptcy Court in Delaware to consider putting KaloBios under a trustee or having the company's case converted to a chapter 7 bankruptcy. KaloBios is down to nine employees, has no ongoing trials and has no significant ongoing operations, Vara said. Additionally, a potentially pivotal deal to acquire a drug made by privately held Savant Neglected Diseases LLC is now off the table and KaloBios has only $2.9 million in unencumbered cash, Vara said. Read more. 

For a further analysis of commercial fraud, make sure to pick up a copy of ABI’s Fraud and Forensics: Piercing Through the Deception in a Commercial Fraud Case. 

When a community hospital closes or is sold to a for-profit operator, there is a loss to the community, according to a commentary by Kenneth Rosen in the Wall Street Journal Bankruptcy Beat Blog. Despite protestations by for-profit operators, a community loses something of value by the conversion of a nonprofit hospital to a for-profit hospital. The mission statements are different. The question is how the loss gets valued and whether the community is compensated for the loss. Societal benefit played a role in the development of bankruptcy law in the U.S., according to Rosen, and it should play a role in the allocation of proceeds from the sale of a nonprofit hospital. The nonprofit hospital that operates in chapter 11 in order to effect a sale for the benefit of the debtor’s creditors (like most chapter 11s today) continues to receive services rendered by the community. Without those valuable services, the hospital may not be able to operate post-petition, according to Rosen. Read more. (Subscription required.) 

A panel of experts will gather tomorrow on an abiLIVE webinar to examine issues that arise in the restructuring of continuing care retirement communities. Register for free! (CLE available for $25 administrative fee). 

For more on hospital and health care insolvencies, be sure to pick up a copy of the ABI Health Care Insolvency Manual, Third Edition, from the ABI Bookstore. 

The bankrupt operating unit of Caesars Entertainment Corp will soon ask a U.S. judge to shield its parent from $12 billion of lawsuits to facilitate a debt-cutting rescue deal, but approval could set a bad precedent for creditors, Reuters reported on Friday. Hedge fund bondholders have sued Caesars in New York and Delaware over guarantees on the bankrupt unit's debt. While Caesars has said that the lawsuits are without merit, it has warned it could join its operating unit in bankruptcy if rulings go against it. Bankruptcy Judge Benjamin Goldgar in July denied a request by Caesars to stay the lawsuits, but a U.S. appeals court has since said that ruling should be reviewed. The case returns to Judge Goldgar this week.

The U.S. Bankruptcy Court for the District of Delaware on Friday sustained objections of the U.S. Trustee in the case of Boomerang Tube, LLC to the fee applications by counsel to the unsecured creditors’ committee because “they include a provision indemnifying them for expenses incurred in any successful defense of their fees.” The U.S. Trustees objected to the inclusion of the fee defense provisions in the retention applications, contending that the provision is precluded by the recent Supreme Court holding in ASARCO.